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UTEP Economists Forecast Las Cruces, El Paso Economies in 2019

Feb 2, 2018

Researchers with UTEP’s Border Region Modeling Project presented their financial forecasts for Las Cruces, El Paso and Mexico’s Ciudad Juarez and Chihuahua City during a recent forum.

New Mexico, and Las Cruces in particular, has been slow to recover since the recession hit more than 10 years ago in December 2007.

According to data from the Bureau of Labor Statistics, New Mexico’s unemployment rate finished 2017 at 6 percent, about 2 percent above the national average. The Las Cruces jobless rate in November was slightly higher at 6.3 percent. UTEP Professor of Economics Tom Fullerton said the city’s sluggish recovery is largely because of state and federal budget woes.

“That’s hurt the overall economic performance of the city because the public sector represents a proportionally larger segment of the Las Cruces metropolitan economy than it does elsewhere in New Mexico or in El Paso,” Fullerton said.

Meanwhile, El Paso is seeing a 40-year low in unemployment.  It was four percent in December and has remained under six percent for three straight years for the first time since mid-1973. That’s despite El Paso having a higher jobless rate than Las Cruces during the height of the recession.

“They face the same problem but their economy is a little bit larger and a little more diverse here in El Paso than in Doña Ana County,” Fullerton said.

Fullerton said the lack of diversification in Las Cruces translates into slower rates of business and income growth.

“It’s been a tough 10-year period and that’s not unique to Las Cruces, that has been observed in most of the state of New Mexico as a whole,” Fullerton said.

UTEP Professor of Economics Tom Fullerton presents his 2019 forecast for the Borderplex region.
Credit Michael Hernandez

Project associate director Adam Walke co-authored the report with Fullerton. He said he expects Las Cruces to keep growing in the next few years. But the outlook isn’t bright beyond the current forecast.

“At some point, it’s hard to say when, the national and state economies are going to return to recession and at that point we would expect a rise in unemployment and lower GMP in Las Cruces as in other places,” Walke said. “But for the short term, in the next 2 years, we expect the economy in Las Cruces to continue growing.”

GMP, or gross metropolitan product, measures a city’s economic performance.

According to the report, Las Cruces’ GMP is projected to be more than $5.8 billion by 2019 while El Paso is forecasted to grow to nearly $28 billion.  The report said while business in Las Cruces is gradually strengthening, the total number of businesses will still be below 2007 peak levels through the current forecast.

Population growth in Doña Ana County has also leveled off since the recession. The report estimates the county’s population in 2019 will be about 217,000 residents, just 12,000 more people than in 2009. Fullerton said people are finding better jobs out of state in Texas and Arizona.

Median inflation-adjusted household income in Las Cruces was $41,215 according to 2016 U.S. Census Data. That’s more than $2,000 lower than El Paso and more than $4,000 lower than the state average.

One major risk that will impact the Borderplex economies is the outcome of the North American Free Trade Agreement, or NAFTA. If the U.S. pulls out of the agreement, Fullerton said analyses show Mexico and Canada will both fall into fairly steep recessions, while the U.S. will fall into a shallower recession accompanied by higher prices.

“Well that combination is referred to at least during the Carter years of economic history in the United States as stagflation so we may observe the reemergence of stagflation in the United States,” Fullerton said.

Fullerton said many companies are aware of the risks of NAFTA’s restructuring and have been putting together contingency plans to work around the agreement.

There are some bright spots. Total employment in the Mesilla Valley has exceeded 102,000 people for the first time. Fullerton said the private sector in Las Cruces is seeing gains and will continue to do well.

“Manufacturing has stabilized, it’s growing a little bit,” Fullerton said. “Trade and transportation are doing much better... the hotel sector, the hospitality sector is doing well in Las Cruces and the healthcare sector is doing well. But the private sector can’t do it all by itself in Las Cruces.”

Walke agrees Las Cruces has a lot of strong points, and said the city should continue to diversify its economy to increase growth. 

“It has a strong tradition in attracting retirees, people who come from other states to enjoy the weather in the Southwest and I think that that’s something they can capitalize on in the future and perhaps use that as a catapult to grow at a faster pace,” Walke said.

Walke said the recently passed federal tax bill will likely increase GMP and lower unemployment in the short term for Las Cruces and El Paso.